Marketing During a Recession

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Marketing During a Recession
Kessler, Brittaney
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Subjects / Keywords:
Brand image ( jstor )
Brands ( jstor )
Consumer prices ( jstor )
Consumer research ( jstor )
Consumer spending ( jstor )
Economic recessions ( jstor )
Marketing ( jstor )
Prices ( jstor )
Retail stores ( jstor )
Sales promotions ( jstor )
Undergraduate Honors Thesis


The current economic recession has changed the way companies market their products. By looking at marketing efforts that have been effective during past recessions and analyzing what companies are doing right and wrong now, this paper gives insight into efficient marketing tactics during a recession. The marketing research is organized in terms of the 4 P’s: product, price, promotion, and place. Brand image, value pricing, targeted marketing, and the Internet are a few of topics discussed in relation to the 4 P’s. One of the main points this paper makes is that it is essential for companies to continue marketing efforts during a recession. Research shows that this is not only a proactive and effective strategy to utilize during a recession, but will also benefit the company once the economy turns around. ( en )
General Note:
Awarded Bachelor of Science in Business Administration; Graduated May 4, 2010 magna cum laude. Major: Marketing
General Note:
Advisor(s): Dr. Richard Lutz
General Note:
College/School: Warrington College of Business Administration

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University of Florida
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University of Florida
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Copyright Brittaney Kessler. Permission granted to the University of Florida to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder.


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1 Marketing During a Recession Honors Thesis Brittaney Kessler University of Florida Thesis Advisor: Richard J. Lutz, Ph.D


2 Table of Contents I. Introduction : The Recession and Marketing 4 A. Current Recession 4 4 II. Marketing in Past Recession 5 A. Correlation between Marketing and Economic Cycles 5 B. Common Recessionary Marketing Patterns 5 C. Effects of Marketing after Recession 5 III. 6 A. Brand Image 6 B. Innovat ion 7 IV. 8 A. Low Price Trend 8 B. Value 8 C. Premium Products: Dilemma 9 V. 10 A. Targeted Marketing via All Media 10 i. Television 11 ii. Internet 12 B. Budget 12 C. Advantages & Disadvantages of Sales Promotion 13 D. New Promotional Tools 14 i. Precision Marketing 14


3 ii. In store Promotions 14 iii. Internet 15 iv. Social Networking 16 VI. Place 17 A. In store 18 i. Scope of Products 18 ii. In store Promotional Trends 19 iii. Environmentally Friendly 19 B. Online 19 i. Current Online Trend 19 ii. Tips for Companies Going Online 20 VII. Recession Winners 20 A. Walmart 20 B. McDonalds 21 C. Hyundai 21 VIII. Recession Losers 22 A. Luxury Goods 22 IX. Conclusion 23 X. Bibliography 25


4 Introduction The industrialized world is currently experiencing an economic recessionary period roughly comparable to the Great Depression. Although no specific date marks the beginning of this economic downturn, most will agree that at some point during the early fall of 2008 it became apparent that a financial crisis was imminent. Regardless of when the recession precisely started, it is saf e to say that for well over a year companies have been forced to accept the situation and figure out a way to navigate through it. The recession has already caused many casualties throughout the corporate world and it has yet to be seen just how much damag e will result. Marketing is playing a critical role in how companies are faring and well planned and executed marketing tactics could be the difference between success and failure. It is important to remember that a goal of any company is to sell a produc t or service to a consumer. A lthough this being a financial crisis makes it easy to assume financial aspects of a business are most important, a company cannot exist without a consumer and therefore without marketing Consumers are most important whether in a recession or not, and it is through marketing that consumers learn about products and services. For that reason, the type of marketing utilized by companies during a recession is crucial. There is a difference in marketing during a recession compared to times of expansion. This paper will discuss different marketing tactics used 4 Ps price, promotion, and place. Also included will be a look at both successful and inef fective marketing tactics employed by several companies during the current recession The worst recession our generation has experienced is a crisis for every company in the industrialized world. However, through aggressive and proactive marketing an oppor tunity exists for


5 companies to emerge stronger than before and to be positioned for even more su ccess once the economy turns around. Marketing in Past Recessions Before considering what type of marketing should be employed, one should consider the role marketing plays for a company during an economic downturn. Research done by the University of Southern California analyzed several past studies on the effects of advertising during recessions, which resulted in some very strong conclusions. One of the prin cipal and most profound findings is quite simply that advertising is strongly related to economic cycles ( Tellis ). This means that as the economy rises and falls, so do marketing and advertising expenditures. The aforementioned study also found that firms respond to recessionary periods specifically by cutting back on all forms of advertising, decreasing price promotions, and increasing non price promotions such as in store displays ( Tellis ). Knowing this pattern can give firms an advantage when planning marketing tactics during the current recession. If it is known that competitors will be marketing their products less, then companies have an excellent opportunity to promote their own products without as much noise to distract or confuse consumers. Advert isements become more effective, which can result in more sales. There is one other key finding from this study that impact s the direction of rest of this paper. M ost of the studies analyzed in the report found that the advertising and marketing strategy a company utilizes during a recession ha s effects that last beyond the recession ( Tellis ). Marketing directly affects sales and this finding exemplifies how detrimental cutting back on marketing can be during a recession. Companies tend to market their pr oducts less during an economic decline, which can then lead to not only lower sales during the recession, but also lower sales once the economy begins to rebound A similar conclusion can be drawn for those


6 companies that maintain or increase marketing exp enditures during recessionary periods. To reiterate, a company should at least maintain the same level of marketing, if not increase it, during a recession. Without marketing the consumer cannot be reached and without the consumer a product or service cannot be sold and a company will inevitably lose profits. 4 Ps : Product With a little background as to why it is a good policy to maintain overall marketing levels during a recession, it will now be beneficial to determine what tactics work best during a When dealing with an economy in which people are spending less money and spending it more wisely, it is critical for companies to re eva luate their brand image. The importance of brand image can be demonstrated by the automobile industry. When consumers think of GMC or Chrysler, all that comes to mind today is government bailouts and bankruptcy. Ford, on the other hand, was actually able to enhance its brand image as the one financially stable automobile manufacturer in the United States that did not want or need a government bailout (Graham). Another import ant factor to note in the automobile industry example is that not only was Ford prepared to support itself without government intervention, but during this recession it has continued to move forward as a leader in environmentally friendly vehicles This ha s not only allowed Ford to maintain its brand image, but it has also made it possible to improve upon it. The effects of the brand image it has created will last beyond this recession and will position Ford favorably in the minds of consumers for years to come. Brand image directly relates to brand equity. The higher the brand equity, the more favorable a product is viewed by a consumer. This holds true even during a recession. Brand


7 equity provides a competitive advantage, as well as a motivation for cons umers to purchase a product. Take Coca Cola, the company with the highest brand equity in the world, for example. Even during this recession Coke was able to post 3% sales growth during the first half of 2009 (Ramzy) This sales growth suggests that brand equity is even more powerful than the recession. Coca All American brand image has given it the ultimate advantage over competitors. When a person associates a brand with positive emotions or ideas, it is possible for that brand to provide comfort during times of uncertainty. it would be sensible for a company to innovate during a recession Budget cuts do not leave much room for research and dev elopment teams to create new products or for marketing departments to launch them. However, if possible, a company would be wise to continue innovating new products or enhancing products already on the market. According to Andrew Razeghi, marketing profess a recession is a great time to launch a new product (Pollack). In fact, P&G introduced two of its most expensive products on the market today during recessions, White Strips and the Swiffer (Pol lack). Interbrand, a company that ranks companies based on their revenue and brand image, used IBM as an example of a company that utilizes innovation to stay ahead during recession s Jez Frampton, CEO of Interbrand, said, Innovation is the bedrock of any s uccessful company in the future. (Fredrix) If companies produce new products or improve old ones they are able to keep consumers interested. A company that stays idle during a recession is setting itself up to fall behind competitors. On that note, if a company is the first to introduce a new product during a recession, it has an opportunity to become the market leader when the economy turns around and consumers are more willing to spend money.


8 4 Ps : Price ll consider is price. Consumers view price as an indicator of value, which is important for a company to keep in mind. The tricky part is figuring out how low to price a product in order for a consumer to be willing to buy it, without compromising the value. This becomes especially true during recessionary periods. Consumers have less disposable income and are more likely to take product price into accou nt when making purchases According to r esearch done by McKinsey in the last two years an average of 18 percent of consumers bought lower priced products across all product categories (Bohlen). What is particularly alarming to producers is that consume rs are not only trying lower price d products, but they also like them. During past recessions consumers typically would spend conservatively, but return to pre recessionary spending patterns once the economy turn ed around Now, it appears as though consume rs are trying cheaper products and changing their opinion s Of those consumers who tried less expensive products in the past two years, approximately 46 percent reported that the product performed better than expected (Bohlen). As a result, 34 percent of t hese consumers said they no longer preferred more expensive products (Bohlen). These results were mirrored in another study conducted by Sanford C. Bernstein in which more than 75 their more expensive competitors (Byron). A n astounding 41 percent responded that the higher This statistic stands out significantly because it demonstrates the effect on the perception of value. idea of the value is hugely detrimental. Typically products are priced


9 willingness to pay for it and the perceived value of the product ( Kerin ). If consumers consider a premium product to be of similar value to a lower price d competitor, undoubtedly the cheaper product will be purchased. Companies pro ducing premium brands are faced with the challenge of either changing the price of their product, which could equate to lower margins and less perceived value or keeping prices the same and risk ing losing consumers to lower price d competitors Note that t his is not just a theory of what could possibly happen as a result of the recession. Some of the largest companies in the country are dealing with this issue today. For example, P&G recently released Tide Basic, a cheaper alternative to regular Tide deterg ent as a result of consumers switching to cheaper brands (Bohlen). P&G as a whole has had difficulty during this recession finding a balance between keeping their premium products priced high enough to earn a profit while still being able to appeal to consumers An increase in marketing has contributed to slightly increas ed sales; however this marketing has been expensive and has actually eaten away at profits (Byron). A strategy for companies to consider when struggling with the pricing issue is dete rmining exactly are perceived as less valuable (Bohlen). Also, p roduct positioning is now more important than ever, particularly if companies want to be able to keep their products both premium and necessary in mind Considering the statistics provided on recent consumer opinion s of low priced products, it is easy to understand why a company would think very hard about cutting price, even if just temporarily. However, it can be argued that lowering the product price in the short term has long lasting negative effects. Not only does it devalue the product, but it also puts the company at risk of losing consumers if prices are raised in the future (Brinklow)


10 There may be no definitive answer that tells companies whether or not price cuts are the best way to compete in this recession. The decision on price strategy should be made on a case by case basis. Producers of premium priced products (i.e. luxury brands, designer labels, etc) face the biggest dilemma in terms of pricing. Many see price cuts as a short term solution and damaging to brand image (Brinklow). However, the studies analyzed clearly show that consumers are not only willing to sample cheaper produ cts, but they are also experiencing a change in their impression of value. As previously stated, without a customer a company cannot survive. If cutting price is the only way to attract consumers during this recession, then companies will need to find a wa y to adjust their prices with the times and readjust their product accordingly 4 Ps : Promotion Of the 4 Ps discussed in this paper the promotional aspect is arguably the most important for a company to examine during a recession. A consumer will never k now about a product if there is no communication from the company. And, as stated already, promoting via various marketing tactics is absolutely necessary for a company during a recession. We have learned that companies that maintained or increased marketi ng during past recessions have fared better both during and after the economic downturn than companies that decreased marketing expenditures. When considering the promotion of a product, a company must first analyze what type of marketing (mass or target ed ) will be most beneficial for its product s The ever increasing amount and variety of technology available to both consumers and producers has allowed companies to successfully pursue a much more targeted approach to their marketing in recent years. The recession has made such target marketing necessary for companies hoping to not o nly differentiate their product but also to market specific product benefits important to different


11 consumers around the world. Consumers are spending their money as wisely as possible; therefore, companies need to market their products just as wisely. Across product categories and across all marketing medi a a more targeted approach is being used by companies in all industries. In terms of medi a any and all forms ranging fro m direct mail to television commercials to Internet promotions can be tailored to appeal to specific consumers. L arge retailers are seeing the positive effects target marketing has over mass marketing. For example, some retailers such as Saks Fifth Avenue and Nordstrom are finding ways to promote their products to consumers by holding private shows or holding special after hours events (Haber). Utilizing a smaller and more intimate setting, as compared to large fashion shows typical of many retailers, allow s for more one on one interaction and customization. Also, target marketing creates a more emotional bond between the consumer and the product, increasing the brand image in the mind of the consumer (Haber). Marketing via television commercials is also becoming more targeted, according to Advertising Age. Marketers are using more than mass commercials to promote a product. Now commercials are being created for a specific moment or group of people, whether it is viewers of a particula r show or viewers more likely to watch at a certain time ( Planning ). Also, television commercials are being developed as a means of communicating targeted promotions Examples include a promotional contest for viewers of a particular show or home improvement ideas leading viewers to Home Depot ( Planning ). Targeted television commercial messages will only become more popular as the recession continues and marketers see the positive impact.


12 Target marketing through television commercials is another excellent way of creating an emotional tie between the product and consumer. Research conducted by the World Advertising Research Centre showed that, even during economic downturns, ads dedicated to emotional engagement were more profitable than ad s using a more rational tone discussing aspects like price (Binet). Also, television is still one of the most discussed topics of conversation for people (Binet). So, television is an excellent medium for targeted messages that could increase word of mout h and emotional appeal both of which are crucial during a recession Another and perhaps the most obvious medium marketers can use to target specific consumers is the Internet. Regardless of the economic status, the Internet should be one of marketers mo st used mediums A s the recession continues, the Internet offers an opportunity for marketers to develop a loyalty amongst their consumers unlike anything before. More importantly, Internet marketing should not simply be secondary to any other marketing program ; rather it should be one of the most used and well manage d components (Costa). A company must determine the budget before any promoti on can begin. During a recession the immediate reaction of many companies is to cut marketing expenditures. It cannot be said enough that this is not an effective way to manage a business during a recession. If a company must cut costs, a study the Profit Impact of Marketing Strateg ies suggests that reducing manufacturing and administrative costs is an effective way to save money and stay profitable ( Binet ). According to the same study, companies that cut marketing budgets and new product development often underperform (Binet). Across the board every paper and study researched for this thesis came to the same conclusion : that marketing budgets should not be reduced during a reces sion. In terms of both short and long term benefits, reducing marketing expenditures will do little to help a company during and after a recession. More importantly,


13 maintaining or increasing the marketing budget can in fact increase profits in the long te rm, while cutting spending can reduce sales and income anywhere from 20 percent to 30 percent (Binet). This paper has already discussed the advantages and disadvantages of cutting prices. A slight variation of a price cut is a product sales promotion. Generally speaking, there are five promotional elements: advertising, personal selling, public relations, sales promotion, and direct marketing (Kerin). All aspects of promotion are important to encompass in a marketing plan, however this paper will speci fically look into sales promotion. Sales promotion can be seen as an extension of the price cut strategy in the sense that the product is not producing maximum profits and margins are being reduced Just as with cutting price, utilizing a sales promotion has both advantages and disadvantages. Sales promotion is a short term solution intended to entice consumers to buy a product. Examples of sales promotion are coupons, rebates, samples and sweepstakes (Kerin). The key advantage of a sales promotion is the short term spike in sales. Also, promotional periods are a great opportunity for consumers to sample a product for the first time with less risk. If the consumer samples the product and develops a favorable opinion towards it he or she may continue to pu rchase the product after the promotion has ended. The disadvantage of sales promotion is the short term nature of it. Research conducted by AdWeek shows that, while promotions keep consumers happy, the overall effect on sales for the company is negative ( Binet). The increase in sales generated will not last long term and if a company uses promotions too often, consumers will learn to make purchases only during promotional periods. During a recession a promotional event will sound very appealing to a compa ny looking to boost interest and sales. Companies must keep in mind that promotions are


14 merely a quick fix and should never be the main element of a marketing plan. Rather, sales promotions should run in conjunction with a much broader and long term market ing plan. Many companies and marketers have found that various new promotional tools are proving to be beneficial during the current recession. Some companies have found that taking the targeted marketing approach to the extreme has proven to garner sales and loyalty. In fact Catalina Marketing has even coined a new term, precision marketing to describe their approach to reaching consumers during th e recession ( Promotion ) According to Maria Thompson of Promotion ) Consumers have become much smarter shoppers as a result of this recession, and marketers must respond by using a more specialized approach. Bonnie Carlson, president of Promotional Marketing Association, confirms sion there has been a move towards a more targeted mass media, such as cable, as well as more in depth discussions and planning between retailers and marketers (Quinton). Another promotional element heavily used during the recession is in store promotion s. In store promotions were used well before the recession started ; however now marketers are reaching goals by targeting consumers directly at the point of purchase (Promotion). Don E. Schultz, a marketing professor at Northwestern University, says that in store promotions are an prior to the recession were not seen as cutting edge and were largely considered the responsibility of the sales team (Schultz). Now that a recession has hit and marketing budgets have been limited, marketers are finding that promoting in stores is an efficient way to reach consumers (Schultz).


15 New tools have even been created to aid in producing the most highly targeted and ideally located promotions. For example, the Pointer Media Network is a database of 250 million weekly shopping transactions that provides essentially continuous information on consumer behavior. This information is then used to create promotions, both in store a nd out (Promotion) The Internet is providing marketers some of the greatest and most cost effective Technographics Benchmark showed that in 2009, 34 percent of con was spent on the Internet (Bernoff). However, as of 2009, only 12 percent of marketing expenditures media time, yet received 31 percent of the spending budget (Bernoff). This will not always be the case. The current recession is limiting marketing budgets and the Internet will soon be utilized more and used more efficiently to reach consumers. In fact, it is predicted that by 2013 19 percent of marketing spending will be for digital endeavors (Bernoff). Also, companies are quickly realizing that in terms of cost effectiveness, the Internet trumps traditional media. An example of this trend can be exemplified through to advert ise during the Super Bowl this year. Rather than spending money powered community This campaign is using social media sites such as Twitter and Facebook to ga rner support and fans. This idea is not only saving Pepsi about $10 million in Super Bowl spending but it is also proving to pay off in terms of media coverage. In fact, according to Nielsen, more than 21 percent of media coverage and Internet buzz about Super Bowl commercials was directed at Pepsi (Ingram). This example clearly demonstrates that not only is Internet marketing cheaper, but that it is also effective.


16 Social networking has become a part of everyday life for millions of consumers and there is no question as to the necessity of companies taking advantage of this opportunity. Most importantly, social networking takes the idea of word of mouth to a whole ne w level. Word of mouth is imperative in the marketing world. It allows consumers to learn about products from other consumers, which in turn makes the buying decision less risky. The Internet provides the her and learn about products. Now marketers are seeing a need to measure the true effectiveness of word of mouth compared to traditional marketing tactics (Trusov). An in depth study by Michael Trusov, Randolph Bucklin, and Koen Pauwels on the effectivenes s of word of mouth through social networking sites concluded that word of mouth is in fact vital to marketers and an excellent source of acquiring new customers (Trusov). During a recession consumers are even more risk averse and reluctant to purchase new products (Bernoff). This once again highlights the importance of social networking and word of mouth during this economic downturn. It might seem like companies have little control over social networking, as the sites are platforms for consumers to talk to consumers. However, some companies have found unique ways to harness the power of social networking and promote their own products. This is not only important for companies as a means of staying current with the times and technology, but as previously d iscussed, a cheaper way to promote a brand. For example, companies can create their own social networking sites for consumers with similar interests to join and communicate Campaign for Real B allows esteem to come together and discuss this topic, while simultaneously promoting the Dove brand image (Mangold).


17 Social networking sites were also used as a promotional tool during the 2008 Pre sidential Election. Candidates had Facebook pages and other websites to provide information and platforms for discussions (Mangold). Companies can also use the Internet and social networking to conduct promotional sweepstakes and/or to engage consumers (Ma ngold). Both Coca Cola and Pepsi have online reward programs where consumers can earn points and redeem prizes. An where consumers could win $30,000 by submitting videos displaying their sports skills T ube, reviewed by judges, and eventually voted on by other online viewers. This is a prime example of a company promoting a product via social networking, allowing consumers to be completely involved and able to discuss the product. Websites like You T ube, where videos can be downloaded and viewed by the world are becoming domin ant outlet s many companies are using to create word of mouth. Burger King, for example, secretly videotaped the hilarious reaction s of customers being told that the Whopper was no longer being sold (Mangold). These videos were viewed by millions of consume rs online and created a positive buzz for Burger King. Companies have become increasingly creative in terms of promoting their product via social networking and there are a plethora of other ways to make use of opportunities the Internet is providing. Duri ng a recession, social networking can become a life saver for a product and companies need to develop marketing plans that not only incorporate the Internet, but generate positive word of mouth from it. 4 Ps : Place iscussed in this paper is place. The place a product


18 past this typically meant a store. Whether it was a typical retail outlet or specialty boutique, consumers used to have to physically go to a location to purchase a product. Now thanks to the Internet, consumers are able to purchase products from the comfort of their home s and have them delivered to their doorstep s With more options and the capability of shop ping at almost any store in the world via their website s marketers have plenty of opportunities to appeal to consumers at the point of purchase, whether that be in the store or from the computer. Research conducted by MediaWeek showed that 29 percent of shoppers make purchases impulsively in the store (Featherston). This demonstrates just how important it is for companies to not only get their products in to as many stores as possible, but to also place them in easy to spot locations for consumers. This a lso highlights how essential in store promotions are during this economic downturn. The recession has changed the way retailers operate and several new tactics will be used in 2010 in an attempt to attract consumers and increase profits. The first change involves the scope of products offered to consumers. Retailers are focusing on products that sell and are working to keep fewer products in Doing this should help keep retailers from having to sell a lot of items at clea rance prices. Another benefit of limiting inventories is that consumers may feel more of an impulse to buy an trend retailers will be following in 2010 is price relate d and consists of less discounting of products a return to regular ly planned sales spending appears to be slightly on the rise and retailers are searching for pricing methods that will help the m start earning higher margins and making larger profits. Also changing in retail will be what you see in the stores. People are shopping less so


19 Hoffman, a retai u rth retailing trend is the move towards becoming more environmentally but it is also positive for the bottom line. The rise of online shopping and the recession have changed the retail landscape. However, at the end of the day companies need to get their products into the stores and stores need to entice consumers into them. Even before the recession hit, online shopping was becoming a normal way of life for many consumers. To get an idea of just how many people are shopping online, consider Ford. Planning ). This indicates that as generations are becoming more technologically savvy, their shopping habits will also follow tha t trend. Companies need to realize that their websites are essentially online version s of their store s and create them to be easy to use and navigate. Ecommerce has not struggled as significantly as many offline stores during this recession and will only continue to grow at a steady rate in the next few years. In fact, Forrester Research claims that ecommerce will grow by over $130 billion in the next four years (Malta). Forrester Research cited three main reasons why consumers are more apt to shop online rather than in store during the recession : for convenience, for research capabilities online, and for the ability to purchase anything at any time (Malta). There are several options retailers have to make their online stores more appealing to consumers. M ost important to consumers surveyed by Forrester Research was shipping costs and back orders (Malta). Consumers who are weary of buying products online often dislike the high shipping fees. Many retailers, however, are already aware of this and are finding ways to lower


20 shipping costs or are even running promotions offering free shipping. One of the biggest benefits of shopping online compared to in the store is that consumers have access to anything the company sells, not just what happens to be in stock a t the physical location If online retailers are unable to keep their stock levels up and ready for purchase, consumers will quickly lose faith in this benefit. Some retailers are combating this by allowing shoppers to monitor their stock levels online (Ma lta). During the recession consumers are turning to the Internet to research the best products at the best prices. Retailers need to take this as an opportunity to perfect their websites and online shopping capabilities. Recession Winners This paper has already used a few companies as examples of correct ways to operate during a recession. Throughout the duration of this recession there have been several other companies that saw this as an opportunity to create a better brand image rather t han a time to duck and cover. Hands down the recessionary marketing winner has been Wal mart USA Today crowned Wal c ampaign (Petrecca). Wal Mart has successful ly repositioned itself as the place for everyone from any income class to shop an d save money. No longer is Walm art seen as the retailer for low income shoppers R ather the middle and even some of the upper class mart during t his recession (Pollack). Walm art has not just been successful during this economic crisis it has thrived durin g it. In fact, during 2009 Walm art saw a sales increase of 5.1 percent, more than doubling what analysts predicted (LaMotta). Executives at Walm a existing stores, and conservative financial and operational practices, such as tight inventory


21 Another recessionary winner is McDonalds. Luckily for McDonalds, no matter how little was more than luck during this recession. In fact, McDonalds did two very smart things. First, the company empha sized value more than ever before. McDonalds revamped and strategically consumers are feeling strapped for cash (Pollack). Second, they introduced the McCafe. America runs on coffee and McDonalds introduced affordable coffee at the perfect time. McDonalds executives cite the launch of the McCafe coffee lineup as a major factor in their 2009 financial success (Gross). As a resu lt of its value promoting marketing and McCafe introduction, McDonalds was able to increase sales by 2.6 percent in 2009 (Pollack). This is especially impressive when most other fast During a reces sion consumers are less likely to make unnecessary large purchases. Automobiles, for example, are usually purchased when people have extra disposable income and not when the country is struggling through one of the toughest economic times in our history. H yundai, however, has managed to be quite successful in the past few years, thanks in large part to its Hyundai Assurance program. In July of 2009, Hyundai posted an increase of 3.6 percent in profits, which was double what most analysts predicted (Ihlwan). The Hyundai Assurance program offers consumers a chance to purchase an automobile without as much risk. For example, if person buys a Hyundai and becomes unemployed within a year of making the purchase, Hyundai will buy back the automobile (Startz). This program appeals to consumers who are unsure of their job stability, yet need to buy an automobile. Hyundai heavily marketed this program and its brand in the United States. This created a positive buzz and awareness


22 amongst hesitant consumers and allowed H yundai to prosper in a time when few trusted the automobile industry. Recession Losers Most companies across all industries have struggled, to say the least, during this recession. One of the hardest hit areas of any industry was the luxury goods sector (Castaldo). Rather than picking one luxury company to describe, this paper will use the entire luxury goods fewer luxury goods during an economic downturn, but buy ing such expensive goods may be viewed as ostentatious and distasteful (Castaldo). The North American luxury goods market has suffered the most in the past few years, a n estimate d sales decreas e of approximately 16 percent in 2009 (Castaldo). Every sector, from luxury cars to jewelry to artwork, took a massive hit. Not only was this market a loser in terms of sales, but also in terms of layoffs (Castaldo). Some companies were forced to lay off hundreds and even thousands of employees. Luxury g oods producers are faced with a unique challenge when dealing with a recession. If prices are lowered to become more appealing to consumers, then the brand prestige will also be above that of other brands. If the price is lowered, then the value will be questioned and the brand image companies work so hard to create will be at risk. So, luxury companies are presented with a dilemma of either reducing prices so consumers can act ually afford their products or maintaining prices in an attempt to salvage the value of their product. No matter what luxury goods producers decide, marketers are faced with a seemingly impossible challenge. One strategy that could be beneficial to these c ompanies is to prepare and position themselves for


23 consumers for when they do have extra spending money. Conclusion The biggest financial crisis the United State s has experienced since the Great Depression has redefined how companies market their products and re emphasized the importance of marketing to a company. If anything can be taken away from this paper and this recession, it should be that it is imperative for companies to continue marketing at the same level or even higher than prior to the recession if they want to be successful. Cutting marketing expenditures can have negative effects in both the short and long term However, increasing marketing expen ditures can help a company during and after a recessionary period. for marketers to consider when creating a marketing plan for a company during this recession. When considering the product a company offe rs, marketers must emphasize a positive brand image. A company will not survive if consumers do not think favorably of it During this recession it is especially important for Also, in terms of product, companies would be wise to continue innovating during a recession. Thinking beyond the recession is an excellent way to position a company to be successful once the recession is over. The price of a product is an indicator of value. During a recession marketers are faced with the difficult challenge of deciding whether to lower price and potentially damage the value, or to stick with the same pricing methods and potentially lose consume rs who cannot afford the product. The typical response to this question is to never lower prices. The value of a brand is far more important to maintain, especially once the recession ends. However, research shows that


24 this particular recession is changing consumers. Now consumers are not only trying lower priced products, but they are also beginning to prefer them. There is also the option of temporarily lowering prices and then once the economy turns around, returning to normal pre recession prices. This could also be a bad idea, as consumers will become accustomed to the lower prices and unwilling to pay more even after the recession ends The price issue is very unique and marketers for each company will have to decide what is best for their particular p roduct. There is no single answer that will work for every company. Promotion of a product is nonnegotiable whether in a recession or not. During this recession an extremely targeted approach is wise. There are several marketing trends during this recessi on, one of the biggest being utilizing the Internet and social networking. The place a product is purchased can be designated as either in store or online. In store purchases are important for marketers to consider because of the high rate of impulse buyin g done by consumers. Online shopping has been one of the biggest trends in retailing since well before this recession hit. Marketers must make online shopping easy and accessible for consumers. S everal companies, including Walm art McDonalds, and Hyu n dai h ave been successful despite the economy and marketers should take a look at them as an example of what went right. Although it may not seem like it, a recession offers marketers a great opportunity to re evaluate their brand s and reposition them in a wa y to make them not only successful during the recession, but also for the years following. While a recession is a time for consumers to be more conservative with their spending, it is also a time for marketing teams to get more creative and use their budge ts wisely. There is no doubt that this recession will some day pass, and when it does it will be the companies who marketed their products and their brand s the smartest that will be on top.


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